Nuclear Energy Loses Cost Advantage

Identifying the real costs of competing energy technologies is complicated by the wide range of subsidies and tax breaks involved. As a result, U.S. taxpayers and utility users could end up spending hundreds of billions, even trillions of dollars more than necessary to achieve an ample low-carbon energy supply, if legislative proposals before the U.S. Congress lead to adoption of an ambitious nuclear development program, Mr. Cooper said in a report last November...

Federal loan guarantees cut nuclear construction financing costs by allowing the utilities to sell bonds at a lower interest rate. But at the same time the guarantee means that "the U.S. Treasury, and therefore the taxpayers, are on the hook for the value of the loans should they go bad,” Mr. Cooper said...

Mr. Koplow of Earth Track said two of the other subsidies in the Senate bill, the investment tax credit and five-year accelerated depreciation, would together “be worth between $1.3 billion and nearly $3 billion on a net present value basis per new reactor.

“This is equivalent to between 15 and 20 percent of the total all-in cost of the reactors, as projected by industry.”

Over all, Mr. Koplow said, the proposed subsidy package would undermine the equity requirements of the nuclear loan guarantee program, designed to ensure that investors have a strong interest in the long-term success of the venture. “Although investors will get all the profit if the reactor project is successful, they will bear virtually none of the financial risk if the project fails,” he said. “This is a disastrous incentive structure.”

By distorting energy markets, these subsidies would “effectively make the government the chooser of which energy technologies will be winners and which will lose,” he said. The American Power Act “does not build a neutral policy platform on which all energy technologies must compete.”

He said handing out huge subsidies would also cloud the transparency of decision-making. “This approach,” he said, “which replaces price signals with decisions by a handful of often unnamed individuals within the U.S. Department of Energy, plays to none of the inherent strengths of the U.S. market system to spur innovation and effectively allocate risks and rewards. Further, the basis, and sometimes scale, of these subsidy decisions is largely hidden from the public view.”